HUL changes Direct selling operations into e commerce

New Delhi:Hindustan Unilever (HUL) has changed the operating model of its direct-selling business, Hindustan Unilever Network, paving the way for a likely debut in e-commerce.

“The Hindustan Unilever Network business model has transitioned from physical servicing to an online ordering and fulfillment model,” an HUL spokesperson said.

Consumers can buy the Aviance and Lever Ayush range of health and beauty products through HUL network consultants, who will operate only online now and will no longer have any physical offices. HUL did not provide additional details.

The maker of Dove soap and Surf detergent, which launched the direct-selling division in 2003 to offer high-value home and beauty-care products, attributed the change in model to “optimising operating costs and making the business more competitive.”

The direct-selling model involves representatives or consultants of firms pushing products to consumers, generally in their homes or workplaces, through explanation and demonstrations and doing away with the need for retail outlets. Globally, direct selling operates across over 100 countries with an estimated market size of $167 billion.

In India, the market is projected at RS 7,200 crore and the direct-selling industry has been mistaken for fraudulent financial pyramid schemes. This is mainly due to lack of proper regulation and clarity, which resulted in leading direct-selling firm Amway India’s CEO William Pinckney being arrested twice.

The change in HUL’s network selling model is a result of a review, given the operating context of the business and the need to secure long-term viability, the company said. “As a result of this review, we realised the need to optimise our operating costs and make the business more competitive,” the HUL spokesperson said.

Grocery products including soaps, biscuits and tea are increasingly being bought online by Indian consumers a space so far dominated by fashion, electronics and books. A recent report by researcher Kantar had forecast proved that e-commerce for FMCG globally would increase 47% to $53 billion by 2016, up from $36 billion in 2014, adding that Asia would be the next key growth market in this space.